Wednesday, January 18, 2017

Global Shipping Prices Are Staging A Major Comeback And Here's Why

The CEO of the world's largest shipping firm by capacity has given his unique insight into the rebound seen in global shipping prices in the last few months.

Speaking to CNBC Wednesday the World Economic Forum in Davos, Søren Skou, the chief executive officer of Maersk Group, told CNBC on Wednesday the global freight index for container shipping had more than doubled in the last nine months months.

"It's simply driven by the fact that the carriers have taken a lot of capacity out of the market," he said.

"They are losing significant sums of money every day, and continuing to do that and continuing to do that is simply not sustainable. Today, about 5 percent of the global container fleet is actually idle ... That has helped to support prices."

"We and others were surprised by the fact global trade not growing nearly as much as one would have expected five years ago."

The Baltic Dry Index - traditionally used as a barometer of global shipping - is up around 150 percent in the last year. Some have speculated that proposed infrastructure spend with the incoming Donald Trump presidency could have buoyed the sector while others suggest traders have weighed into a marker that had seen extreme weakness in recent years.

Skou said that he wasn't focused on any potential dampening of global trade under a Trump presidency - who has touted protectionist policies on the campaign trail - but highlighted that plans for lower taxes in the U.S. could aid his industry.